Corporate Opportunity

Black-letter Rule

Corporate insider may not pursue an opportunity if

The corporation is financially able to exploit the opportunity
The opportunity is within the corporations line of business
The corporation has an interest or expectancy in the opportunity and
By taking the opportunity for his own, the corporate fiduciary will thereby be placed in a position inimitable to his duties to the corporation

DGCL § 122 17

Enables corporations to renounce - in advance - any interest or expectancy in specified business opportunities
Can be adopted by a subsidiary to renounce claims it may have against a parent company
Can prove useful in spin-offs and similar divestitures
Adopted by Delaware in 2000
Removes doubt raised by Siegman v Tri-Star Pictures Del Ch 1989 about ability of Delaware corporations to include corporate opportunity provisions in their certificates of incorporation

In re eBay Del Ch 2004

Denies defendants' motions to dismiss
Derivative claims against individual directors and officers
for usurping a corporate opportunity
Claims against Goldman Sachs for aiding and abetting
Based on receipt of favored allocations in hot IPOs ("spinning")
Corporate opportunity discussion

Sup Ct Opinion 802 A 2d 257
Delaware Supreme Court reverses summary judgment in favor of directors over claims that directors breached their fiduciary duties
For approving their own compensation arrangements
For usurping a corporate opportunity

Equity Corp v Milton 221 A2d 494 Del 1966

Yiannatsis v Stephanis 653 A2d 275 Del 1995

Schreiber v Bryan 396 A2d 512 Del Ch 1978

David J. Greene & Co v Dunhill International 249 A2d 427 Del Ch 1968

Kaplan v Fenton 278 A2d 834 Del 1971

Broz v Cellular Information Systems 673 A2d 148 rev'd Cellular Information Systems v Broz 663 A2d 1180 Del Ch 1995

Thorpe v CERBCO 676 A2d 436 Del 1996

Fliegler v Lawrence 361 A2d 218 Del 1976

Yiannatsis v Stephanis 653 A2d 275 Del 1995

Yiannatsis v Stephanis CA No 1508 aff'd 653 A2d 275
Del 1995

Ryan v Tad's Enterprises 709 A2d 675 aff'd mem
693 A2d 1082 Del 1997

David J Greene & Co v Dunhill International 249 A2d 427 Del Ch 1998

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